Death Benefits Explained
When a member of a retirement fund (Pension Fund, Provident Fund, Provident Preservation Fund, or Retirement Annuity Fund) dies before reaching retirement age (depending on the rules of the particular administration fund), the death benefit (the monies) must be paid to the member’s beneficiaries. The death benefits do not form part of the assets in the deceased estate.
Trustees given the power to deal with the death benefits.
It depends on the administration fund trustees, usually there is a Death Benefit Distribution Family Meeting, where the administration fund trustees gather all the prospective beneficiaries of the death benefit.
The administration fund trustees are required to investigate the circle of the deceased member’s dependants and, having identified them, allocate the monies to the deceased members’ beneficiaries fairly.
According to the law, the administration fund trustees are given discretionary power, a choice based on the facts before them on how to effect a fair share of the monies.
The key factors considered by the Trustees before distributing the death benefits.
The administration fund trustees will choose whom and how to distribute the monies by considering the following factors:
The ages of the beneficiaries.
The wishes of the deceased member (Some Fund administrators allow their members to complete a nomination form, but the distribution of the monies all depends on the choice of the administration fund trustees).
The degree of dependence on the deceased member
The beneficiary relationship with the deceased member
The future earning capacity/ potential of the beneficiaries.
The financial status of the beneficiaries and
The amount available for distribution.
The factors are simply a guide to the administration fund trustees.
The administration fund trustees’ first task in distributing the monies is identifying all potential beneficiaries, dependents, or nominees.
The administration fund trustees have (12) twelve months to finalize the death benefit distribution from the day of the death of a member.
Death benefits aim to protect those who were financially dependent on the deceased member during his lifetime.
The administration fund trustees must exercise their power properly and conduct a diligent investigation according to the law.
The law gives powers to the administration fund trustees in allocating death benefits. Therefore, in exercising the power, the administration fund trustees have to take into account all relevant considerations, exclude all irrelevant factors, and not interfere with their discretion. The law requires that the administration of fund trustees act fairly.
Mokhabela and Mposula Attorneys will assist you , contact Lungani Mposula on 072 761 1278 or email lunganim@mmplaw.co.za.